Business Owners Toolbox Blog Discussions and articles to help the small business owner solve the challenges they face as they grow their business.

March 27, 2012

Business Culture of Innovation and Growth: Netflix

Filed under: Culture of Growth — Tags: , , — Mike Van Horn @ 9:04 am

Thanks to Frédéric Filloux, of Monday Note, March 18, 2012, for permission to adapt his post.

Does your company’s business culture support your desired growth? Here’s a culture statement from Reed Hastings, CEO of Netflix, which has rocked the streaming media sector like never before. How does your culture compare?  How could you apply these? Are there things here you think would not apply to your company? Why not? Leave a comment below.

Here’s an excerpt:

Behavior and skills. “We hire and promote people who demonstrate:

1. Judgment

2. Communication: Listening others and articulating views

3. Impact: “You focus on great results rather than on process. You exhibit bias-to-action, and avoid analysis-paralysis”

4. Curiosity : “You learn rapidly and eagerly”, “You contribute effectively outside of your specialty”

5. Innovation: “You challenge prevailing assumptions when warranted, and suggest better approaches ”

6. Courage: “You say what you think even if it is controversial”, “You make tough decisions without agonizing”, “You take smart risks”

7. Passion: “You inspire others with your thirst for excellence”, “You celebrate wins”, “You are tenacious”

8. Honesty: “You are quick to admit mistakes”

9. Selflessness: “You are ego-less when searching for the best ideas.”

Other Netflix core values include:

— “Great Workplace [means working with] Stunning Colleagues : Great workplace is not espresso, lush benefits, sushi lunches, grand parties, or nice offices. We do some of these things, but only if they are efficient at attracting and retaining stunning colleagues.”

— “Corporate Team:  The more talent we have, the more we can accomplish, so our people assist each other all the time. Internal “cutthroat” or “sink or swim” behavior is rare and not tolerated.”

— “Hard Work = Not Relevant : We do care about accomplishing great work. Sustained B-level performance, despite “A for effort”, generates a generous severance package, with respect. Sustained A-level performance, despite minimal effort, is rewarded with more responsibility and great pay.”

— No room for what Hastings call “Brilliant Jerks”. His verdict:  “Cost to effective teamwork is too high.”

— About processes: “Process-focus Drives More Talent Out. Process Brings Seductively Strong Near-Term Outcome.  Then the Market Shifts… Market shifts due to new technology or competitors or business models. [Then] Company is unable to adapt quickly because the employees are extremely good at following the existing processes, and process adherence is the value system. Company generally grinds painfully into irrelevance.”

— “Good” versus “Bad” Process:
“Good” process helps talented people get more done.
- Letting others know when you are updating code
- Spend within budget each quarter so don’t have to coordinate every spending decision across departments.
- Regularly scheduled strategy and context meetings.”

“Bad” process tries to prevent recoverable mistakes:
- Get pre-approvals for $5k spending
- 3 people to sign off on banner ad creative
- Permission needed to hang a poster on a wall
- Multi-level approval process for projects
- Get 10 people to interview each candidate.”

— ” We realized… [that] We should focus on what people get done, not on how many days worked . Just as we don’t have an 9am-5pm workday policy, we don’t need a vacation policy. No Vacation Policy Doesn’t Mean No Vacation. Netflix leaders set good examples by taking big vacations – and coming back inspired to find big ideas.”

“Expensing, Entertainment, Gift & Travel: “Act in Netflix’s Best Interest” Generally means… Expense only what you would otherwise not spend, and is worthwhile for work. Travel as you would if it were your own money. Disclose non-trivial vendor gifts. Take from Netflix only when it is inefficient to not take, and inconsequential. “Taking” means, for example, printing personal documents at work or making personal calls on work phone: inconsequential and inefficient to avoid.”

January 9, 2012

Are There “Meaningless Innovations?”

My answer to LinkedIn question by Terrell L. McTyer

If you are a small player, say a consultant or other solopreneur, you’d better steer clear of “meaningless innovations,” because they could pull you under.

I’ve done a talk to consultants’ groups called “Innovate or Die,” where I stress how important it is to make sure that your efforts at innovation are well-targeted, and that you know how to market them once created. Not all of us can afford to bet the farm on a potential “disruptive innovation” that turns “meaningless” when nobody buys it.

TMcT: “But don’t you have to take risks to make it big?”

Yes, you have to take risks, but how big and with whose money? Entrepreneurs take PRUDENT risks. Two things:

— There’s a risk/reward calculation. The bigger the potential reward, the greater risk is justified. BUT it’s easy to fool yourself. “This is foolproof. We have no competitors.” I just lost $25k investing in one of these.

— OPM. This is why we have VCs and angels. They can afford to lose your investment. Of course, their price is high.

— There’s an absolute ceiling on risk you should take. Despite the image of the “all in” player, are you going to bet your own house? Your kids’ college funds?

Maybe you will. I know many who have. Some lost, and they started over. Or the wife went back to work. (Why is it that men are more likely to bet the farm than are women entrepreneurs?)

I guess the biggest error is not going for it due to fear of the above. You regret it forever.

The second biggest error is going for it, but NOT going in big and fast. Prudent, organic investment in innovation, then your better capitalized competitors whiz past you, leaving you stunted. This has happened to me.

August 24, 2010

Is Management Obsolete?

Filed under: Growth Management — Tags: , , — Mike Van Horn @ 4:01 pm

In “The End of Management” (, 8.21.10) Alan Murray says that “managed corporations” are incapable of thriving in today’s accelerating change. He contends, “Traditional bureaucratic structures will have to be replaced with something more like ad-hoc teams of peers, who come together to tackle individual projects, and then disband.”

I reacted strongly to this, since I’m always advising small, growing companies that they need more management, not less.

My response: Okay, so this “ad hoc band of peers” comes together, builds and commercializes a whizbang disruptive new gadget like the iPad, puts it on the market, and I buy one. Wow, it’s great!

Then they disband. But wait. Who provides warranty service if they’ve disbanded? I sure hope there’s some big corporation behind them, interested in self-perpetuation and continuity enough to provide good customer service.

No venture capitalist I’ve ever met would back such a venture. A VC’s first question is, “How will you perpetuate this long enough for me to get my money out?” And nobody will cash out the VC unless they in turn are convinced that the endeavor they’re investing in has longevity and strong management.

A corporation’s biggest stakeholders are its customers, and customers want longevity and continuity. I’ve been buying Dial Soap for decades, and I hope some bureaucratic corporation will keep it available for the rest of my life, with as little innovation as possible.

So Mr. Murray, I think it’s way too soon to talk about corporate management becoming obsolete. For every bumbling bureaucratic corporate dinosaur you name, I can name a company like Google or Facebook or Apple where top management strives to find the balance between creative destruction, disruptive innovation, and profit-generating continuity. The only reason Google can afford to give its engineers this 20% time for new exploration is that its “regular business” is profitable enough to support this workstyle–that is all overhead.

If anything, managing a company like Apple or Google is tougher than managing a staid bureaucratic corporation. But both types have strong corporate management styles and systems and cultures. They’re just different.

I contend that your “ad-hoc teams of peers, who come together to tackle individual projects, and then disband” can only be effective within a larger milieu where strong policies and systems for continuity are paramount. And that requires dang good management.

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